Alternative Mine Financing
b) Maintenance of the mining concessions. In many countries mining concessions are subject to the payment of a license fees (patentes mineras). Failure to make the payment can ultimately cause the mining concessions to go to an auction procedure. If that happens (and in the assumption that the royalty does not run with the land), the acquiring third party is not bounded by the royalty agreement so it is important that the parties include in the royalty agreement a covenant regarding the maintenance (including the payment of the license fees), protection and defense of the mining concessions that will be subject to the royalty.
c) Bankruptcy. In addition to the provisions the parties may have agreed upon regarding this matter in the relevant agreement (i.e. bankruptcy as an event of default incurred by the mining company), specific local bankruptcy laws have to be reviewed to determine whether there is any restriction to the acceleration of the credit based on this circumstance. In the case of Chile, for example, the new liquidation law provides a financial protection to the debtor for a 30 day period, so the advance unilateral termination of the agreement based on the commencement of a “Procedimiento Concursal de Reorganización” is not allowed, neither is the execution of the guarantees that may have been granted by the defaulting party. Breach of this provision will m
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This article appears in:
International Mining and Oil & Gas Law, Development, and Investment